Exhibit 10.1


 


AMENDMENT NO. 13 TO


CREDIT AGREEMENT


 


THIS AMENDMENT
NO. 13 dated as of July 31,
2008 (the “Amendment”) to the Credit Agreement, dated as of June 30, 2004,
by and among P&F INDUSTRIES, INC., a
Delaware corporation  (“P&F”), FLORIDA PNEUMATIC MANUFACTURING CORPORATION,
a Florida corporation (“Florida Pneumatic”), EMBASSY
INDUSTRIES, INC., a New York corporation (“Embassy”), GREEN MANUFACTURING, INC., a Delaware
corporation (“Green”), COUNTRYWIDE HARDWARE,
INC., a Delaware corporation (“Countrywide”), NATIONWIDE INDUSTRIES, INC., a Florida
corporation (“Nationwide”), WOODMARK INTERNATIONAL,
L.P., a Delaware limited partnership (“Woodmark”), PACIFIC STAIR PRODUCTS, INC., a Delaware corporation (“Pacific”),
WILP HOLDINGS, INC., a Delaware
corporation (“WILP”), CONTINENTAL TOOL GROUP,
INC., a Delaware corporation (“Continental”) and HY-TECH MACHINE, INC., a Delaware corporation (“Hy-Tech”;
and collectively with P&F, Florida Pneumatic, Embassy, Green, Countrywide,
Nationwide, Woodmark, Pacific, WILP and Continental,  the
“Co-Borrowers”), CITIBANK, N.A. and HSBC BANK USA, NATIONAL ASSOCIATION (formerly known as HSBC
Bank USA) (collectively, the “Lenders”) and CITIBANK,
N.A., as Administrative Agent for the Lenders (as same has been and
may be further amended, restated, supplemented or otherwise modified, from time
to time, the “Credit Agreement”).


 


RECITALS


 


The
Co-Borrowers have requested, and the Administrative Agent and the Lenders have
agreed, subject to the terms and conditions of this Amendment, to amend certain
provisions of the Credit Agreement as set forth herein.


 


Accordingly,
in consideration of the premises and of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:


 


ARTICLE I.


Amendment to Credit Agreement.


 


Section 1.1.                                   The chart in the definition of “Applicable
Revolving Credit Loan Margin” in Section 1.01 of the Credit Agreement is
hereby amended and restated in its entirety to provide as follows:


 


	
  Consolidated Senior Debt to

  	
   

  	
  Prime Rate

  	
   

  	
   

  	
   

  
	
  Consolidated EBITDA

  	
   

  	
  Margin

  	
   

  	
  LIBOR Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Greater than 4.25:1.00

  	
   

  	
  0.50

  	
  %

  	
  2.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or less than 4.25:1.00 but greater
  3.50:1.00 

  	
   

  	
  0.25 

  	
  % 

  	
  1.75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or less than 3.50:1.00 but greater
  than 2.25:1.00 

  	
   

  	
  0

  	
  %

  	
  1.60

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or less than 2.25:1.00

  	
   

  	
  0

  	
  %

  	
  1.45

  	
  %

  



 

















 


Section 1.2.                                   The chart in the definition of “Applicable
Term Loan/Equipment Loan Margin” in Section 1.01 of the Credit Agreement is
hereby amended and restated in its entirety to provide as follows:


 


	
  Consolidated Senior Debt to

  	
   

  	
  Prime Rate

  	
   

  	
   

  	
   

  
	
  Consolidated EBITDA

  	
   

  	
  Margin

  	
   

  	
  LIBOR Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Greater than 4.25:1.00

  	
   

  	
  0.50

  	
  %

  	
  2.25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or less than 4.25:1.00 but greater
  3.50:1.00 

  	
   

  	
  0.25 

  	
  % 

  	
  2.00 

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or less than 3.50:1.00 but greater
  than 2.25:1.00

  	
   

  	
  0

  	
  %

  	
  1.75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equal to or less than 2.25:1.00

  	
   

  	
  0

  	
  %

  	
  1.50

  	
  %

  



 


Section 1.3.                                   The definition of “Borrowing Base” in Section 1.01
of the Credit Agreement is hereby amended to add the following sentence at the
end thereof:


 


“Notwithstanding
anything to the contrary, the amount of Eligible Inventory which is
attributable to Foreign Inventory shall be limited to $1,500,000 for purposes
of determining the Borrowing Base.”


 


Section 1.4.                                   The following definitions in Section 1.01
of the Credit Agreement are hereby amended in their entirety to provide as
follows:


 


“Available Revolving Credit Commitment” shall
mean at any time the lesser of (a) the Borrowing Base less
Aggregate RC Outstandings or (b) the Revolving Credit Commitment less
Aggregate Outstandings or (c) the Asset Coverage Amount.


 


“Eligible Inventory” shall mean all inventory
(including raw materials) of the Obligors’ located in the United States and Foreign
Inventory, without duplication, which meet all of the following specifications:
(a) the inventory is lawfully owned by an Obligor, is not subject to any
lien, claim, security interest or prior assignment and is not obsolete, (b) other
than with respect to Foreign Inventory the inventory is stored on property that
is either owned or leased by such Obligor or owned or leased by a warehousemen
that has contracted with such Obligor to store inventory on such warehousemen’s
property, provided that, with respect to inventory stored on property leased by
an Obligor, such Obligor shall have delivered in favor of the Administrative
Agent an appropriate lien waiver (in form and substance reasonably satisfactory
to the Administrative Agent) executed by the Landlord, and with respect to
inventory stored on the property owned or leased by a warehousemen, such
Obligor shall have delivered to the Administrative Agent an appropriate lien
waiver (in form and substance reasonably satisfactory to the Administrative
Agent) executed by the warehousemen, provided further that, in the event that the
Co-Borrowers shall not have delivered to the Administrative Agent a lien waiver
reasonably satisfactory to the Administrative Agent executed by such Landlord
or warehouseman, the Administrative Agent may elect to reserve against such
inventory held at such location in an amount to be determined by the 


 


2

















 


Administrative Agent in its Permitted
Discretion; (c) the Obligor has the right of assignment thereof and the
power to grant liens and security interests therein; (d) the inventory
arose or was acquired in the ordinary course of such Obligor’s business, and no
portion thereof represents defective or damaged goods or perishable goods or
unsalable goods; (e) no accounts receivable or document to title has been
created or issued with respect to such inventory; (f) the inventory is
readily marketable for sale or lease by the applicable Obligor, (g) the
inventory does not consist of any packaging materials and supplies (other than
inventoried packaging materials and supplies), supplies (other than supplies
held for sale), obsolete goods, goods in transit to third parties or consigned
inventory or, other than with respect to Foreign Inventory, inventory in
transit.


 


“Revolving
Credit Commitment Termination Date” shall mean November 30, 2008.


 


“Premises”
shall mean, collectively, the Jupiter Premises, the Tampa Premises and the
Cranberry Premises.


 


Section 1.5.                                   The following definitions are hereby added to
Section 1.01 of the Credit Agreement in their appropriate alphabetical
order:


 


“Amendment
No. 13 Effective Date” shall mean July 31, 2008.


 


“Applicable
Overadvance” shall mean $3,000,000, for the months of July and August of
2008, $1,500,000 for the months of September, October and November of
2008, and $0 at any other time.


 


“Asset Coverage Amount” shall mean as of any
Borrowing Date an amount equal to the difference between (a) Total Asset
Value and (b) Consolidated Senior Debt.


 


“Foreign Inventory” shall mean all inventory
(including raw materials) of the Obligors’ purchased by an Obligor from a
vendor not located in the United States for resale in the United States and in
transit to an Obligor, provided that such Obligor has ownership and title of
such inventory and such inventory is covered by one or more insurance policies
provided by one or more insurance carriers acceptable to the Lenders which name
the Administrative Agent as loss payee and additional insured, and which
provide for at least thirty (30) day’s prior written notice to the Administrative
Agent of any modification or cancellation of such policies.


 


 “Total
Asset Value” shall mean the sum of (a) 80% of the value of the Obligor’s
Eligible Accounts Receivable, plus (b) the lesser of (i) 50% of the
aggregate value of the Obligor’s Eligible Inventory and (ii) $15,000,000,
plus (c) Premises Value plus (d) the Applicable Overadvance; provided,
however, such percentages and the foregoing inventory limitation may be
revised from time to time solely by the Required Lenders in their Permitted
Discretion (i) upon 30 days’ prior written notice to the Co-Borrowers so
long as no Default or Event of Default has occurred and is then continuing or (ii) immediately
upon written notice if a Default or Event of Default has occurred and is then
continuing.  Without limiting the
foregoing, the Required Lenders may revise such percentages after review of
each field audit of the Obligor’s receivables and inventory.  The value 


 


3

















 


of all Eligible Inventory shall be determined
at the lower of cost or market value on a first in first out basis in
accordance with Generally Accepted Accounting Principles applied on a
consistent basis.


 


“Premises Value” shall mean the value of the
Premises, as determined by the Required Lenders, from time to time, based upon such
information that the Required Lenders shall reasonably deem significant
(including any appraisals of the Premises), which amount is $9,760,000, as of
the Amendment No. 13 Effective Date.


 


Section 1.6.                                   Section 2.01(a) of the Credit
Agreement is hereby amended by amending and restating clause “(ii)” thereof to
provide as follows:


 


“(ii) Aggregate RC
Outstandings would exceed the lesser of Borrowing Base or the Asset Coverage
Amount


 


Section 1.7.                                   Section 2.06(a) of the Credit Agreement
is hereby amended by amending and restating clause “(ii)” thereof to provide as
follows:


 


“(ii) Aggregate RC
Outstandings would exceed the lesser of then current Borrowing Base or the
Asset Coverage Amount”


 


Section 1.8.                                   Section 3.03(b) of the Credit
Agreement is hereby amended and restated in its entirety to provide as follows:


 


“In the event that (i) Aggregate
Outstandings exceeds the Total Revolving Credit Commitment or (ii) Aggregate
RC Outstandings exceeds the lesser of the Borrowing Base or the Asset Coverage
Amount, the Co-Borrowers shall immediately pay or prepay so much of the Loans
as shall be necessary in order for the Aggregate Outstandings to be in
compliance with the Total Revolving Credit Commitment and Aggregate RC
Outstandings not to exceed the lesser of the Borrowing Base or the Asset
Coverage Amount, as the case may be.  To
the extent that such prepayments are insufficient to reduce (a) Aggregate
Outstandings to an amount equal to or less than the Total Revolving Credit
Commitment or (b) Aggregate RC Outstandings to an amount equal to or less
than the lesser of the then current Borrowing Base or the Asset Coverage
Amount, the Co-Borrowers shall pledge Cash Collateral, in an amount equal to
the amount of such short-fall which Cash Collateral shall secure the
reimbursement obligations with respect to Letters of Credit and Banker’s
Acceptances.”


 


Section 1.9.                                   Section 6.04 of the Credit Agreement is
hereby amended to add the following new subsection “(c)” immediately following
subsection “(b)” thereof:


 


“(c)                            Prior to the Revolving Credit Commitment
Termination Date, permit the Administrative Agent or its representative to
conduct (a) a field audit of the Co-Borrowers’ accounts receivable and
inventory, and all related books and records, and (b) an appraisal of the
Premises, as the Administrative Agent deems necessary or desirable, all such
costs, expenses and charges for the account of the Co-Borrowers.”


 


Section 1.10.                             The table in Section 7.13(a) of the
Credit Agreement, Fixed Charge Coverage Ratio, is hereby amended and
restated in its entirety to provide as follows:


 


4

















 


	
  Period

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2009

  	
   

  	
  .80:1.00

  	
   

  
	
  December 31, 2010 and at the end of each
  fiscal year of the Co-Borrowers thereafter 

  	
   

  	
  1.20:1.00 

  	
   

  



 


Section 1.11.                             The table in Section 7.13(b) of the
Credit Agreement, Minimum Capital Base, is hereby amended and restated
in its entirety to provide as follows:


 


	
  Period

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30, 2008 through
  December 30, 2008

  	
   

  	
  $

  	
  22,500,000

  	
   

  
	
  December 31, 2008 through
  March 30, 2009

  	
   

  	
  $

  	
  23,500,000

  	
   

  
	
  March 31, 2009 through
  December 30, 2009

  	
   

  	
  $

  	
  22,500,000

  	
   

  
	
  December 31, 2009 to March 30,
  2010

  	
   

  	
  $

  	
  23,500,000

  	
   

  
	
  March 31, 2010 through
  December 30, 2010

  	
   

  	
  $

  	
  24,000,000

  	
   

  
	
  December 31, 2010 and thereafter

  	
   

  	
  $

  	
  26,000,000

  	
   

  



 


Section 1.12.                             The table in Section 7.13(c) of the
Credit Agreement, Consolidated Senior Debt to Consolidated EBITDA,  is
hereby amended and restated in its entirety to provide as follows:


 


	
  Period

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30, 2008 through March 30,
  2009

  	
   

  	
  4.60:1.00

  	
   

  
	
  March 31, 2009 through June 29,
  2009

  	
   

  	
  5.00:1.00

  	
   

  
	
  June 30, 2009 through
  September 29, 2009

  	
   

  	
  4.60:1.00

  	
   

  
	
  September 30, 2009 through
  December 30, 2009

  	
   

  	
  4.25:1.00

  	
   

  
	
  December 31, 2009 through
  June 29, 2010

  	
   

  	
  4.00:1.00

  	
   

  
	
  June 30, 2010 through
  December 30, 2010

  	
   

  	
  3.50:1.00

  	
   

  
	
  December 31, 2010 and thereafter

  	
   

  	
  3.00:1.00

  	
   

  



 


Section 1.13.                             Section 7.13 of the Credit Agreement is
hereby amended to add a new subsection “(f)” immediately following subsection “(e)”
thereof as follows:


 


“(f)                              Asset Coverage. 
Permit the ratio of Total Asset Value to Consolidated Senior Debt to be
less than 1.00:1.00 at the end of any calendar month.”


 


Section 1.14.                             The unnumbered paragraph at the end of Section 7.13
of the Credit Agreement is hereby amended to add the text “or Section 7.13(e)”
immediately following the text “Section 7.13(d)” in the parenthetical
thereof.


 


Section 1.15.                             Exhibit H attached to the Credit
Agreement is hereby amended and replaced by Exhibit H attached hereto.


 


ARTICLE II.


Conditions of Effectiveness.


 


Section 2.1.                                   This Amendment shall become effective as of
the date hereof, upon receipt by the Administrative Agent of this Amendment, duly
executed by each Co-Borrower and  a
certificate of the Secretary or Assistant Secretary of each Co-Borrower, dated
the date of this Amendment, in form and substance satisfactory to the Lenders, attesting
that all appropriate corporate or partnership action, as 


 


5

















 


applicable, has been taken by such Co-Borrower in authorizing the
execution, delivery and performance of this Amendment and confirming that there
have been no amendments, modifications or other revisions to the Co-Borrowers’
respective Certificates of Incorporation and By-laws or Partnership Agreement, as
the case may be, except those amendments, modification and revisions which have
been previously delivered to the Lenders.


 


ARTICLE III.


Representations and
Warranties; Effect on Credit Agreement.


 


Section 3.1.  Each Co-Borrower hereby represents and
warrants as follows:


 


a.                                       This Amendment and the Credit Agreement, as
amended hereby, constitute legal, valid and binding obligations of the
Co-Borrowers and are enforceable against the Co-Borrowers in accordance with
their respective terms.


 


b.                                      Upon the effectiveness of this Amendment, the
Co-Borrowers hereby reaffirm all covenants, representations and warranties made
in the Credit Agreement to the extent that the same are not amended hereby and
each Co-Borrower agrees that all such covenants, representations and warranties
shall be deemed to have been remade as of the date hereof.


 


c.                                       No Default or Event of Default has occurred
and is continuing or would exist after giving effect to this Amendment.


 


d.                                      No Co-Borrower has any defense, counterclaim
or offset with respect to the Credit Agreement.


 


e.                                       All corporate and limited partnership action
of each Co-Borrower appropriate and necessary, including, if necessary,
resolutions of the Board of Directors of each of P&F, Florida Pneumatic, Embassy,
Green, Countrywide, Nationwide, Pacific and WILP and resolutions of the general
partner of Woodmark, to authorize the execution, delivery and performance of
this Amendment, has been taken.


 


Section 3.2.                                   Effect on Credit Agreement and Loan Documents.


 


a.                                       Upon the effectiveness of this Amendment,
each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”,
“herein” or words of like import shall mean and be a reference to the Credit
Agreement as amended hereby.


 


b.                                      Except as specifically amended herein, the
Credit Agreement, and all other documents, instruments and agreements executed
and/or delivered in connection therewith, shall remain in full force and
effect, and are hereby ratified and confirmed.


 


c.                                       Except as expressly provided  herein, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of the Administrative Agent or the Lenders, nor constitute a
waiver of any provision of the Credit Agreement, or any other documents,
instruments or agreements executed and/or delivered under or in connection
therewith.


 


d.                                      The other Loan Documents and all agreements,
instruments and documents executed and delivered in connection with the Credit
Agreement and any other Loan Documents shall each be deemed to be amended and
supplemented hereby to the extent necessary, if any, to give effect to the
provisions of this Amendment.


 


6

















 


ARTICLE IV.


Miscellaneous.


 


Section 4.1.                                   This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.


 


Section 4.2.                                   Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.


 


Section 4.3.                                   This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, and all of which,
taken together, shall be deemed to constitute one and the same agreement.


 


[next page is
signature page]


 


7

















 


IN WITNESS
WHEREOF, the
Co-Borrowers, the Lenders and the Administrative Agent have caused this
Amendment to be duly executed by their duly authorized officers as of the day
and year first above written.


 


	
   

  	
  P&F INDUSTRIES, INC.

  
	
   

  	
  FLORIDA PNEUMATIC MANUFACTURING

  
	
   

  	
  CORPORATION

  
	
   

  	
  EMBASSY
  INDUSTRIES, INC.

  
	
   

  	
  GREEN MANUFACTURING, INC.

  
	
   

  	
  COUNTRYWIDE HARDWARE, INC.

  
	
   

  	
  NATIONWIDE INDUSTRIES, INC.

  
	
   

  	
  WOODMARK INTERNATIONAL, L.P.

  
	
   

  	
  By:

  	
  Countrywide Hardware, Inc., its General

  
	
   

  	
   

  	
  Partner

  
	
   

  	
  PACIFIC STAIR PRODUCTS, INC.

  
	
   

  	
  WILP HOLDINGS, INC.

  
	
   

  	
  CONTINENTAL TOOL GROUP, INC.

  
	
   

  	
  HY-TECH MACHINE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph A. Molino, Jr.

  
	
   

  	
   

  	
  Joseph A. Molino, Jr., the Vice President of each

  
	
   

  	
   

  	
  of the corporations named above

  
	
   

  	
   

  
	
   

  	
  CITIBANK, N.A., as a Lender and as

  
	
   

  	
  Administrative Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen Kelly

  
	
   

  	
   

  	
  Stephen Kelly, Vice President

  
	
   

  	
   

  
	
   

  	
  HSBC BANK USA, NATIONAL

  
	
   

  	
  ASSOCIATION, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Raymond Fincken

  
	
   

  	
   

  	
  Raymond Fincken, Vice President

  



 


8